tv First Business FOX June 25, 2010 4:30am-5:00am EDT
economists from across the globe gear up to meet this weekend for the g-20 summit. a look at what's on the agenda. plus, what to do if you are approaching retirement age and you haven't set enough money aside? and don't like the way the government is handling our national debt? it's your chance to speak up. we'll tell you how. plus, viewer mail. it's all ahead on today's edition of first business. you're watching first business: financial news, analysis and today's investment ideas. good morning everyone. it's friday june 25, 2010. and sovereign debt fears once again rattling investors nerves out there. we've got u.s. stock markets potentially on the verge of making new lows for 2010. so not a lot of confidence out there in general, angie. but there are some bright spots in the technology sector. absolutely. and you hit the nail on the head, beejal. a lot of doldrums already hitting the markets. it's the dog days of summer already. but a lot of
money going into tech. especially with apple. apple actually had one of its biggest product launches ever. the lines were longer than anybody had ever seen for any launch ever of an apple product. it's the craze over the latest version of the iphone, angie. we're also watching oracle and research in motion, rim the maker of the blackberry. those two companies came out with positive earnings. also financial stocks on the other hand, coming under selling pressures as congress rushes to finalize a final banking reform bill. and let's get the latest from the trading floor at the cme group and join larry levin of trading advantage. larry, stocks back on shaky ground here. the question is can they hold above those recent lows earlier this month? you know, if floor traders were to make their bets beejal, i would say no. for the last three or four days now, we've seen traders down here selling right on the open. i think it's a lot believe down here that we're going to see a double dip. whether that's true or not, we really don't know yet. but certainly an awful lot of traders are buying like that's what's going to happen. and when we look at the selling
pressure here, how big is the volume? you know, it's not really big. which is another reason that traders are confused right now. there certainly selling. but they're not seeing the big volume behind us that their looking for. and that volume needs to be on the sell side. we've gone down the last couple of days or so. but it really hasn't been on big volume. i think that's surprising a lot of traders. ok so obviously you're short on the markets right now, right? what level would you want to cover those short to get out of your trade? i tell ya, i will look at that psychological 10 50 would be the first thing i would really look at. i think we have a good chance of seeing that area, but i think a lot of buyers are coming in at that point. and that will be the indication, 1050 in the s&p. ok, give me a level where if they do break through it, the bottom could fall out of the market again. i would say 10 even, maybe 1020-10 even would be a really critical level. there will be even more buyers down at 10 even. if we don't hold that level, i think there's an awful lot of stops down there and an awful lot of weakness that people will really believe
at that point. ok, when you say 10 even, you're referring to an even thousand on the s&p 500? that's exactly. the s&p futures is what i trade down here. the cash isn't too far away. but 10 even and the futures is what i look at. ok, any other sentiment out there that you're looking out for? you know just an awful lot of unsureness. the market doesn't like and shortness, whether it's from traders or from the business cycle. so until that improves, and that's not happening anytime soon. i certainly don't think you're gonna see any big rallies out of the market, that's for sure. ok, thanks very much. larry levin of trading advantage. leaders from the world's 20 largest economies meet this weekend at the g20 summit in toronto canada. and they are sure to focus on renewed sovereign debt fears. on thursday, credit default swaps on greece's government debt rose to a record high. which means the markets are demanding a much higher premium to protect against a government default. there's also the lingering question of whether spain will need a formal bailout package. so far, european leaders have
refused to address that possiblity. also on the agenda is the idea of a global bank tax to pay for any future bank bailouts. france, germany and britain support the idea. however, canada and australia oppose it. meanwhile, europe's banking system is still very fragile. those banks are weighed down by the deteriorating debt of countries drowning. european banks are also at risk of seeing further downgrades, which can have a negative impact on their capital cushions. the golden rule for saving for retirment is: the earlier the better. but for people who did not follow that age old advice, don't lose sleep because it's not too late. we turned to some money pros at this year's morningstar conference on how to set up a last minute retirement savings plan. if the golden years are quickly approaching and you are just starting to think about your retirement fund, you are not alone. it's estimated 75% of americans 55 or older fall short on their
investment money. if you are one of them, a couple of financial planners at the morningstar conference advise: don't quit your job. "prior to quiting your job you really needed to calculate what is your probablity of success given your living standard. for a number of people unfortunately the reality is they should work a little longer. and then when you are trying to calculate how much it's going to be for some of us it's unfortunately going to be a lower sum then we were hoping for." senior financial planner christine fahlund of t. rowe price recommends pushing off your retirement age from 62 to 65 or even 70. and socking money away like crazy, as much as 25% of your salary if you can. "but we don't think it's such a bad picture becuase what we are going to suggest is you save aggressively for those first years and then maybe when you
are in your early 60's you could stop saving quite so much." if you work until 70 you are also not taking out social security, which is a bonus. "so if you can hold off until age 70 compare that to 62 when most people are taking it.. you can double the amount you get from social security. and inflated it's more than double by waiting until 70. and the benefit is tremendous because now the government is backing the payments, they adjust for inflation every year. those payments keep going up. so you've got a payment that is twice as large as you might have had otherwis. more than twice if you consider inflation." so that is a pay off as well as the money you will have by maxing out on your 401k. to diversify your portfolio, fahlund is big on roth accounts. "i would say that for anyone that is behind in the game if you have opportunity to contribute to a roth-give up the tax deduction and put the money after tax. because that money is going to grow for you and you won't have to take it out until you need it." "encourage, if you have a
variety of assets put your most aggressive stock funds in the roth. the roth could grow and be your ace in the hole when you are older." and here's the best part, as you work into your late 60's, fahlund says use your vacation time to take that trip to europe, enjoy hobbies, or sign up for a fun class. while building your last minute nest egg. "if you start to play while you are working the money you are bringing in is significantly more than you would be able to pay yourself from your savings that you didn't save." "more cash flow for longer, in the meantime your savings is growing because you have been investing it wisely and you didn't take social security." a quick note on roth accounts, there are not requirements on when you can withdrawl the money, but you will be taxed on the money up front. mortgage rates are dropping fast. now they're at the lowest levels in almost 40 years at 4.7% for the 30 year fixed rate. experts say mortgage rates are dropping on the heels of falling yields on treasury securities. as investors rush into government bonds, that extra demand is pushing interest rates even lower. there's also a general slowdown in demand for home loans right now. the mortgage bankers association said that mortgage applications dropped 6% from last week.
surprisingly, even refinancings are down from last week too. right now, about 74% of mortgage activity on new loan applications involves refinancings. only 26% of the activity is from new home loans. another blow to the obama administration. a federal judge in louisiana rejected the president's request to keep the oil drilling ban in place while the issue is under appeal. the white house is now considering loosening restrictions. and allowing off- shore oil drilling in certain areas of the gulf. interior secretary ken salazar explained the government's position at a congressional hearing yesterday. "right now we don't know enough to say it's time to lift the pause button." after the oil spill which started on april 20th, president obama ordered 33 deepwater drilling wells be shutdown. that decision is also drawing a lot of fire from lawmakers. "if our government drives our production off of our shores, all we do is increase misery in places that we have no control of. i caution us before we move forward." government officials say right
now, up to 27,000 barrels of oil a day are being captured by containment systems. but there is still a large amount of oil flowing from the well. how problems in the economy, both here and abroad, are affecting consumer confidence. that's later in viewer mail. but first, how you can make your voice heard when it comes to the country's growing debt? that's after the break.
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discussions on the national debt. while some lawmakers in washington may be more concerned about scoring political points on the issue, concerned citizens across the country will meet this weekend in 20 cities to talk about the deficit problem and share their solutions. the event is called america speaks and valerie chang joins us now with more details. valerie, thank you very much for joining us. why is it important for citizens to talk about the debt right now? we think the debt is one of those issues that citizens often don't feel very connected with. but, we felt it was important for them to take part of the discussion. to understand what the challenges are and to hear their input and feed that to policy makers who are in the middle of discussing this important issue. so 20 cities across the country will have meetings. is this involved with
any political party? is there any politics involved behind this? or is it just citizens getting together? this is being brought together by america speaks, which is a non-partisan organization that is expert at bringing together citizens and facilitating a conversation around the public policy issues in a way in which the goal of the discussion is for to be non- partisan, non-political. then what is the goal of the discussions? the go is to make sure, like i said, that citizens get a chance to understand what it is we talk about when we talk about the big budget deficit that we're facing in the long term. to hear what the options are and then to try to grapple with the issues themselves. and try to think about choices and the trade-offs they might make when they think about the programs that get. the taxes they pay. try to make that real for them and make them understand what the challenge really is. now talk about those straight out that you mentioned. one issue in the senate right now, the possible extension of unemployment benefits. really highlights those trade-offs. on one hand, it would continue the jobless
benefits lifeline to roughly 5 million americans. but at the same time would add more than $50 billion to the debt over the next 10 years. is it important then to consider what government spending, any new government spending has on the national debt and the national deficit? i think one of the things that we realize right now is that while the economy is recovering, that we should do what it takes to help the economy recover. but i think the bigger challenge is in fact the long term fiscal deficit when you look out 10-20 years. and to think about once the economy has recovered, what are the kind of credible steps that we as a nation could take to suggest that we understand that there are those challenges that need to be addressed over the long term. and talking about the projections for 2825, looking at the deficit right now. just this month the national debt passed 13 trillion dollars for the first time ever. that's about 60 percent of gdp. in 2025 is expected to be more the 100 percent of the national economy. do citizens understand what that means? i think it's
challenging because the debt has never reached that level before. its reach that once in history which was immediately in the post-world war two period. but, historic for much of the time since post world war two, the deficit has been around 30 percent of gdp. so it's been escalating steadily, and it is true that the projections call for to go above 100 percent, as you said. and we don't really have a very good road map for understanding what could happen to the economy at that point. and that's what america speaks is all about, it's finding the road map to that. well, the event is called america speaks. head to americaspeaks.org to see how you can get involved. valerie chang thank you very much for your time. after the show, be sure to check us out on the web at firstbusinessnews.com for an
inside look at franchises. how one budding entrepreneur is business, despite having no foodplus, what's next for the economy once the stimulus money expecting from the latest version of the i-phone. you can catch these stories and more on our website firstbusinessnews.com. and straight ahead on the show.... one viewer has some harsh words for the country's top on's coming up next.
welcome back everybody. time now for our viewer mail segment. paul eggers is back with us. and we kind of have some pretty sharp comments from our regular watchers. too great comments this week. they're actually two of the best ones that we've done in a long time, paul. let's get to our first one from billy bob.
thanks for those comments, billy bob. yes, of course american consumers are probably not going to finance this recovery, paul. because the economy is still on pretty shaky ground. things are kind of uncertain. i think if anything, the chinese consumers could provide a boost to spending. after all the chinese government did make its exchange rate pretty flexible. more flexible against other currencies. perhaps that would give more spending power to china's people. and wouldn't that be ironic. the chinese consumer
actually spending to get the american economy out of a recession. wow, that would be a first. let's hope that our products over in china are cheaper to them. so, hopefully that could be the case here. and taking a look at the overall picture, paul. i just want to point this out. remember that $787 billion stimulus package? well, only 410 billion has been spent. and a whopping 377 billion is still remaining. that's kind of surprising, to me it seems like maybe the stimulus money is not being spent fast enough. well, i think that that goes to show that have in this money on the sidelines economy weakens gives us strength. we've spoken with a lot of guest on the program and they said the political will for a second stimulus is not there. so i think maybe its a good thing that they're still money to be spent from the first round. well, perhaps it could provide a boost for the second half. but we do want to point out that economic indicators, like you said paul, from housing to the manufacturing data have
already begun to weaken. so we're definitely going to need the money remaining. and now moving on to another e-mail. this one from w.m. moore, he writes... it's an interesting point. we'll see whether our viewer moore has a point with the derivatives regulation going on right now. well we know that in the past, alan greenspan, the former chief of the federal reserve has had been opposed to any regulation of derivatives. and he was all for a free market ideology. and obviously, that has clearly not work for this economy. and larry summers played a key role in the deregulation of derivatives back in the clinton administration. so, whether he changes his mind, now is very important you want to take a
look at that. and and we all know congress is in the midst of considering and finalizing that financial reform bill. of course critics say it is pretty much watered down at this point. there are some big issues that are going down to the wire. and the lobbyist really do have a powerful grip on congress right now. we'll see if we can get any teeth to the final financial reform bill. all right, thanks so much for these e-mails. we appreciate it, keep them coming. keep those calls coming in to us at 312.660.8397. or you can e- mail us at email@example.com. still to come, trader dan deming is here to talk about what he sees in the charts for the summer. we'll be right back.
time now for our chart talk. and dan deming of stutland equities joins us now for a look at the summertime trade. good to see you this morning, dan. how do you think the markets are going to look for july and august? well, we saw a little bit of a breakdown yesterday. but the volatility is certain ticking up here. but as far as the trading environment in the vix options right now. we're seeing the july options a little bit under pressure. yet, we're seeing the demand for the august options. so that kind of tells me that the expectations are that we're going to probably get to the next week or two maintain this 1050 level in the s&p 500 index. but as we move into the
and the july, august, right now we're seeing buyers of options and the vix volatility index. so there is expectation that the volatility is going to continue in the market moving forward. so these we can enjoy the fourth of july holiday, but then things get a little rocky there. so, what do you think will be some of the triggers in the market that could move the numbers on the s&p 500 dramatically? well i think right now, we will get a reading on unemployment in the next week and a half. and also, right now the housing numbers that we saw the last few days have been a little bit disappointing with the stimulus coming out in the marketplace. so, i think that is part of the reason that we're seeing is a drag on the market right now. which could push us back down to that critical level of 1045-1050 in the s&p 500 index. and the momentum in the marketplace right now is pretty high. yesterday we saw almost a 2% move in the s&p 500 index. so, that's what's keeping the vix elevated around 30. thank you very much, dan deming of stutland equities. have a great trading day dan. that's all for today's show. thanks so much for watching. have a great weekend and we'll see you back here on monday.